"At 1:15 pm, the banking company's shares were selling at Rs 1,645.20 on the National Stock Exchange, dropping by 10.72 percent."
Kotak Mahindra Bank's shares dropped sharply by more than 10 percent on Thursday. This decline happened because the Reserve Bank of India stopped the bank from signing up new customers online or through mobile banking.
On April 24, the central bank also told the bank to stop giving out new credit cards because of serious problems with managing IT and keeping data secure. But it's important to know that existing customers won't be affected by these changes.
At 1:15 pm, the bank's shares were trading at Rs 1,645.20 on the National Stock Exchange, falling by 10.72 percent. This not only reduced a big part of the bank's value but also let Axis Bank become the fourth largest lender by market value, overtaking Kotak.
The decrease in share prices didn't just erase a big part of the bank's value. In the past two years, the bank has often had major problems with its core banking system (CBS) and online services because its IT setup and risk management weren't strong enough. The most recent issue was on April 15, 2024, and it caused serious trouble for customers.
"The bank hasn't done enough to make sure its operations can handle challenges, especially as it grows," said the RBI in a statement.
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The Reserve Bank of India has told Kotak Mahindra Bank to stop signing up new customers online and through mobile banking. They've also said the bank can't issue new credit cards.
But people who are already customers won't be affected by these changes.
The RBI made these decisions after looking into Kotak Mahindra Bank's IT systems for 2022 and 2023. They found big problems and asked the bank to fix them, but it didn't happen fast enough.
The RBI said there were serious issues with how the bank managed its IT stuff, like keeping track of equipment, making updates, managing who can use what, and keeping data safe. They also said the bank didn't prepare well enough for emergencies like if something went wrong with their systems.
The bank's been having a lot of problems with its online banking and main computer systems for the past couple of years. The latest issue was on April 15, 2024, and it caused a lot of trouble for customers.
The RBI said the bank hasn't done enough to make sure everything works smoothly, especially as more and more people use their online services and credit cards.
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